Insights

New Study Reveals That Hospitals Charge Huge Markups

Posted on Friday, September 16, 2016 12:55 PM

“There is a real premium in keeping people out of the hospitals,” NAHC President Val Halamandaris has said. These words relate to a new study from Johns Hopkins University that explains how hospitals use enormous markups to maximize revenue.Researchers concluded that many hospitals charge more than 20 times the cost of services so patients may not notice or understand.

“Hospitals apparently markup higher in the departments with more complex services, because it is more difficult for patients to compare prices in these departments,” Ge Bai, who led the study and is an assistant professor at the Johns Hopkins Carey Business School, said in a statement.

“The high charges have led to personal bankruptcy, avoidance of needed medical services and much higher insurance premiums,” said study co-author Gerard Anderson, a professor at the Johns Hopkins Bloomberg School of Public Health. The colossal markups also “affect uninsured and out-of-network patients, auto insurers and casualty and workers’ compensation insurers,” said Anderson.

“There is no regulation that prohibits hospitals from increasing revenues,” Bai told the journal Live Science. “The problem is when they raise rates on people that have no ability to say no because they have an emergency and cannot compare prices.” This includes uninsured and out-of-network patients, “because they don’t have bargaining power against hospitals,” Bai added.

The enormous markups were mutual to both private and non-profit hospitals, but the results concluded that the highest markups lean towards for-profit hospitals with dominance in their local market. Essentially, hospitals with the most power to mark up prices were most likely to do so, the study found.